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Getting redundancies right

Updated: 25 October 2023

The findings from our Global Insolvency Outlook show that most countries are seeing a sharp acceleration of business insolvencies in 2023, with little sign of recovery until 2025.

The Office of National Statistics UK Labour market overview shows this trend is reflected in the UK, and as a result, the numbers of UK employers who have proposed redundancies is on the rise.

Proposed redundancies in the UK
Source: Office for National Statistics (ONS)
Whether it’s well-known high street retailers, or local construction firms, the current economic landscape is piling pressure on the decision makers at the top of businesses. Therefore, it’s important for businesses to consider their legal obligations when considering redundancies, so they don’t potentially find themselves in a legal battle.  

To ensure a redundancy process is considered fair an employer must:

  • Warn and consult employees about the proposed redundancies.
  • If only some staff will be made redundant, identify an appropriate pool of potentially redundant employees, choosing them using a proper selection criteria. 
  • Consider any suitable alternative employment within the business for impacted employees. 
  • Follow any contractual redundancy procedures which are in place.

Hybrid working also brings challenges which must be considered. It’s up to the employer to find a way around this to ensure that a fair process is followed, and those who predominantly work from home have the same opportunities as those who are office based.

Employers need to use a proper selection criteria to score those at risk, to decide who’ll potentially be made redundant.

Employers should use objective factors that are relevant to business needs and can be verified by available information (e.g. appraisals, length of service, disciplinary or attendance records). This information should be accurate.

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Discrimination can often be a concern in redundancy situations. Age, sex, sexual orientation, race, disability, religion/belief (England, Wales and Scotland) or religious belief/political opinion (Northern Ireland) shouldn’t be a factor. To help with this, employers should remember:

  • To avoid subjective factors or personal opinions (e.g. company values, future potential), unless they’re confident they can be applied objectively. 
  • Don't use a ‘last in, first out’ approach. It’s possible to make this a factor amid other selection criteria, or use in a tiebreak situation, but seek legal advice first. 
  • Don't select employees because they’re part-time or on fixed-term agreements. Such employees are legally protected from less favourable treatment. 
  • Don't select employees based on salary - it’ll likely be indirect age discrimination. 
  • Only include performance in the selection criteria if they’ve got records that support it, or if they can score it using measures that aren’t subjective.
  • Exclude the following types of absence (and keep a record that they’ve done so), if they want to use absence as a criteria: maternity or paternity leave, absence due to disability (either their own or one of their dependants) and absence due to an injury suffered at work (unless they can show they’ve consistently applied this to all employees).
If there’s a dispute, they must be able to prove that their selection criteria are fair and has been applied fairly. Obvious inconsistencies are likely to lead to an Employment Tribunal deeming the redundancy unfair. 

Keeping on top of the legal landscape whilst also trying to run a business can be overwhelming. Many businesses, especially SMEs don’t have the in-house legal expertise to deal with today’s challenges. Therefore, a good legal advice service could help reduce the risk of legal action by giving guidance and ensuring procedures are followed.

Also, consider protecting the business with legal expenses - it could provide cover for legal representation and cover for legal expenses in the event of a claim.

Disclaimer – all information in this article was correct at the time of publishing and is for informative purposes only.

1 - HR1: Potential redundancies - Office for National Statistics (ons.gov.uk)